Programme Evaluation with Unobserved Heterogeneity and Selective Implementation: The Mexican PROGRESA Impact on Child Nutrition

This paper considers the impact of Programa de Educación, Salud y Alimentación ( PROGRESA ), a large Mexican rural anti-poverty programme that had an evaluation sample in which overall treatment was randomly assigned to some communities but not others, on child nutrition. When we examine the impact of PROGRESA based on the presumption of randomized allocations, we find that PROGRESA had no or even a negative impact on child nutrition. However, not all children designated to receive nutritional supplements actually did so. Our preferred estimates – child fixed-effects estimates that control for unobserved heterogeneity that is correlated with access to the supplement – indicate a significantly positive and fairly substantial programme effect of the nutritional supplements on children 12–36 months. They imply an increase of about a sixth in mean growth per year for these children and a lower probability of stunting. Effects are somewhat larger for children from poorer communities but whose mothers are functionally literate. The long-term consequences of these improvements are non-trivial; its impact working through adult height alone could result in a 2.9% increase in lifetime earnings.     

The Economics and Financing of Hospitals in Australia

The Australian hospital industry is described and it is noted that the term ‘hospital’ is applied to a wide range of institutions. The main problems and issues associated with hospitals are discussed, including the lack of adequate methods of measuring their ‘products’ and of allocating funds to them. The role of the medical staff in influencing the ‘demand’ for hospital beds and in resource allocation is emphasised as a major influence on hospital behaviour. In a study of the determinants of the costs of Victorian public hospitals it was found that the complexity of the case-mix as measured by diagnosis related groups (DRGs) was a major determinant of teaching hospital costs but not of those of other large hospitals. DRG-based funding and costing of hospitals is recommended as a strategy for achieving increased efficiency.     

Reform of European Merger Policy

The paper highlights the main drivers for merger policy reform in the European Union, including the consequences of the recent appeal court reverses. It discusses some of the substantive and procedural issues that the reform package should address, and outlines the reforms in progress. The author concludes that much of the reform package will be beneficial, but some important opportunities have been missed in this inevitably patchwork process.     

Disentangling the Dividend Information in Splits: A Decomposition Using Conditional Event-Study Methods

While folklore in finance holds that split valuation effectsare due to dividend increases associated with splits, littleis known about magnitudes of dividend and nondividend componentsof split announcement effects. We find that splits and dividendsare indeed informational substitutes, a notion we characterizemore precisely, but a significant portion of split valuationeffects, 46% according to our estimates, cannot be attributedto dividend information in splits. Our techniques extend theliterature on conditional event-study methods and we illustratetheir practical value in testing hypotheses and analyzing datanot amenable to analysis by standard procedures.     

Economic Growth and Productivity Gains from Capital Inflow: A Rejoinder

Journal of Quantitative Economics -     

Economic Development Indicators as Determinants of Medal Winning at the Sydney Olympics: An Extreme Bounds Analysis

This paper examines the variables that determine the performance of countries at the Olympic Games as measured by a weighted sum of the medals won at the Sydney 2000 Games. While previous studies have identified the importance of a country's economic size and the resources available to sport, this paper examines nine more variables including the number of athletes representing each nation and some development indicators. Based on 2310 regressions, both traditional and restricted extreme bounds analysis show that only two variables are robust: the number of athletes and national expenditure on health. Thus, the final model recognises four explanatory variables that include these two as well as GDP and population.     

The price adjustment and lead-lag relations between stock returns: microstructure evidence from the Taiwan stock market

This paper investigates the price adjustment and lead-lag relations between returns on five size-based portfolios in the Taiwan stock market. It finds evidence that the price adjustment of small-stock portfolios is not slower than that of large-stock portfolios. Additionally, limited evidence supports a positive leading role of large-stock portfolio returns over small-stock portfolio returns. These two findings are substantially different from the results of previous research on developed markets.     

Option-Implied Risk Aversion Estimates

Using a utility function to adjust the risk‐neutral PDF embedded in cross sections of options, we obtain measures of the risk aversion implied in option prices. Using FTSE 100 and S&P 500 options, and both power and exponential‐utility functions, we estimate the representative agent's relative risk aversion (RRA) at different horizons. The estimated coefficients of RRA are all reasonable. The RRA estimates are remarkably consistent across utility functions and across markets for given horizons. The degree of RRA declines broadly with the forecast horizon and is lower during periods of high market volatility.     

Separating microstructure noise from volatility

There are two variance components embedded in the returns constructed using high frequency asset prices: the time-varying variance of the unobservable efficient returns that would prevail in a frictionless economy and the variance of the equally unobservable microstructure noise. Using sample moments of high frequency return data recorded at different frequencies, we provide a simple and robust technique to identify both variance components.